U.S. Leaves Door Open to Talks With China Amid Trade-War Fears

The Trump administration indicated it’s willing to negotiate with China on escalating frictions between the world’s two biggest economies, helping to ease fears among investors of a tit-for-tat trade conflict.

U.S. Commerce Secretary Wilbur Ross said China’s response isn’t expected to disrupt the U.S. economy. In an interview on CNBC on Wednesday, he said China’s reaction “shouldn’t surprise anyone.” He said the U.S. isn’t entering “World War III” and left the door open for a negotiated solution.

“Even shooting wars end with negotiations,” Ross said.

Earlier Wednesday, China said it would levy an additional 25 percent levy on about $50 billion of U.S. imports including soybeans, automobiles, chemicals and aircraft. The move matched the scale of proposed U.S. tariffs announced the previous day. The U.S. is allowing 60 days for public feedback and hasn’t specified when the tariffs would take effect, leaving a window open for talks.

China’s retaliation isn’t justified under international trade rules or domestic law, said an official with the U.S. Trade Representative’s office. The appropriate response by China would be for the Asian nation to change its behavior on trade and intellectual property, said the official, who spoke to reporters on condition of anonymity.

U.S. stocks opened sharply lower, but reversed course as investors speculated that the flurry of tariffs may not do much damage to the global economy.

President Donald Trump also downplayed the prospect of a trade war, saying on Twitter Wednesday morning that “we are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.”

Trump later tweeted that “when you’re already $500 Billion DOWN, you can’t lose,” in a possible reference to America’s trade deficit with China. Figures from the U.S. Commerce Department put last year’s trade gap with the Asian nation at $337 billion.

The Trump administration is urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve a rise in trade tensions, a person familiar with the matter said earlier this month.

Investors are weighing the risks of a trade war, with the Trump administration’s latest offensive based on alleged infringements of intellectual property in China. The U.S. is targeting high-tech sectors that Beijing sees as the future for its economy.

“I don’t think this will result in a trade war,” said Stefan Selig, a former under secretary for international trade at the Commerce Department who is now managing partner of BridgePark Advisors. “There will be a little of this tit-for-tat stuff,” then the two countries will likely negotiate compromises on intellectual property and other trade and investment irritants, he said.

While the China retaliation was more “belligerent” than expected, Beijing probably wants to deescalate tensions by underscoring what’s at stake for both sides, Oxford Economics director of global macro strategy, Gaurav Saroliya, said in a research note. “Negotiations will probably lead to less disruptive outcomes for both sides,” Saroliya wrote.

In a statement following the U.S. release of details on its China tariffs, Treasury Secretary Steven Mnuchin said the administration “will continue to engage in discussions with China to address these issues of reciprocal trade.”

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Eric Ni

Partner of CAN Partners LLP

Financial auditor and advisor since 2006

Extensive experience in both US GAAP and IFRS reporting frameworks

Assisting companies going public and improving internal control and compliances to meet regulatory requirements

Master Degree of Management and Professional Accounting, Rotman School of Business, University of Toronto

Bachelor Degree of Law, Soochow University

Lorne Saltman

Partner, Gardiner Roberts LLP

Bar Admission, Ontario, 1973

Extensive experience in diverse areas of tax practice, including in-depth experience on both the international and domestic levels involving wealth preservation for high-net worth clients, cross-border acquisitions and financings, corporate reorganizations, real estate ventures, and the establishment of offshore trusts and private foundations.

Successful track record in resolving disputes with tax authorities at both the federal and provincial levels, including some experience in tax litigation.

Memberships:

American Bar Association, Business Law Section, Taxation Committee, Advisory Panel

American Bar Foundation

Canadian Bar Association

Canadian Tax Foundation

Hague Academy of International Law

International Bar Association

International Commission of Jurists

International Fiscal Association

International Tax Planning Association

Ontario Bar Association

Society of Trust and Estate Practitioners (STEP)

Toronto Chinese Community Services Association

Academic Background:

Juris Doctor, Osgoode Hall Law School

Bachelor of Science, University of Toronto

Michael Cadesky

Managing Partner, Cadesky Tax

In full-time income tax practice since 1980

Vice-chair, CPA Canada Tax Committee for Small and Medium-Sized Enterprises